Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Turning Point Brands Announces First Quarter 2024 Results By: Turning Point Brands, Inc. via Business Wire May 02, 2024 at 07:30 AM EDT -Q1 2024 Adjusted EBITDA of $25.3 million, up 22% over prior year - Net Sales for Q1 2024 Zig-Zag and Stoker’s Products Increased 10% Year-Over-Year -Company reaffirms full-year 2024 adjusted EBITDA guidance of $95 to $100 million. Turning Point Brands, Inc. (“TPB” or “the Company”) (NYSE: TPB), a manufacturer, marketer and distributor of branded consumer products, including alternative smoking accessories and consumables with active ingredients, announced today financial results for the first quarter ended March 31, 2024. Q1 2024 vs. Q1 2023 Total consolidated net sales decreased 3.9% to $97.1 million Zig-Zag Products net sales increased by 11.5% Stoker’s Products net sales increased by 8.0% Creative Distribution Solutions net sales decreased by 44.9% Gross profit increased 6.8% to $51.9 million Net income increased 58.1% to $12.0 million Adjusted net income increased 29.8% to $15.4 million (see Schedule B for a reconciliation to net income) Adjusted EBITDA increased 21.6% to $25.3 million (see Schedule A for a reconciliation to net income) Diluted EPS of $0.63 and Adjusted Diluted EPS of $0.80 compared to $0.41 and $0.62 in the same period one year ago, respectively (see Schedule B for a reconciliation to Diluted EPS) Graham Purdy, President and CEO, commented: “We are encouraged by our first quarter results. We believe the execution of our strategy has Zig-Zag back on a sustainable growth trajectory; Stoker’s continued to grow and improved its market share; and the national launch of our FRE Modern Oral product is off to a good start.” Zig-Zag Products Segment (48% of total net sales in the quarter) For the first quarter, Zig-Zag Products net sales increased 11.5% to $46.7 million. The Alternative business saw strong growth in the quarter complemented by modest growth in US Papers and Wraps partially offset by Clipper sales declines against prior year trade load. For the quarter, the Zig-Zag Products segment gross profit increased 23.0% to $27.5 million. Gross margin increased 550 basis points to 59.0% driven primarily by product mix. “We were encouraged by the outsized performance of the alternative channel in the quarter,” said Purdy. “Our ongoing efforts continue to demonstrate progress toward sustainably growing the Zig-Zag brand.” Stoker’s Products Segment (38% of total net sales in the quarter) For the first quarter, Stoker’s Products net sales increased 8.0% to $36.4 million on mid-single-digit growth of MST and triple-digit growth off a low base for our Modern Oral product FRE partially offset by mid-single-digit decline in loose-leaf chewing tobacco. For the first quarter, total Stoker’s Products segment volume increased 0.1%, while price / mix increased 7.9%. For the quarter, the Stoker’s Products segment gross profit increased 6.9% to $20.8 million. Gross margin contracted 60 basis points to 57.2% Performance Measures in the First Quarter First quarter consolidated selling, general and administrative (“SG&A”) expenses were $32.6 million compared to $30.8 million in the first quarter of 2023. The first quarter SG&A included the following notable items: $1.3 million of accrued legal and severance costs; $2.1 million of stock compensation expense compared to $0.7 million in the year-ago period; and $0.8 million of FDA PMTA-related expenses for modern oral products compared to $0.2 million in the year-ago period. Total gross debt as of March 31, 2024 was $368.5 million. Net debt (total gross debt less unrestricted cash) at March 31, 2023 was $237.6 million. The Company ended the quarter with total liquidity of $189.9 million, comprised of $130.9 million in cash and $59.0 million of asset backed revolving credit facility capacity. During the quarter, the Company re-purchased 72,545 shares at a cost of $2.1 million. 2024 Outlook The Company is maintaining its previous expectation of full-year 2024 adjusted EBITDA of $95 to $100 million. Creative Distribution Solutions (“CDS”) (14% of total net sales in the quarter) For the first quarter, CDS net sales were $14.0 million, gross profit was $3.6 million, and gross margin was 25.4%. Earnings Conference Call As previously disclosed, a conference call with the investment community to review TPB’s financial results has been scheduled for 10:00 a.m. Eastern on Thursday, May 2, 2024. Investment community participants should dial in 10 minutes ahead of time using the toll-free number (888) 330-2502 (international participants should call (240) 789-2713 and follow the audio prompts after typing in the event ID: 6640134. A live listen-only webcast of the call will be available on the Events and Presentations section of the investor relations portion of the Company website (www.turningpointbrands.com). A replay of the webcast will be available on the site two hours following the call. Non-GAAP Financial Measures In addition to financial measures prepared in accordance with generally accepted accounting principles in the United States (GAAP), this press release includes certain non-GAAP financial measures including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS and Adjusted Operating Income (Loss). A reconciliation of these non-GAAP financial measures accompanies this release. About Turning Point Brands, Inc. Turning Point Brands (NYSE: TPB) is a manufacturer, marketer and distributor of branded consumer products including alternative smoking accessories and consumables with active ingredients through its iconic Zig-Zag® and Stoker’s® brands. TPB’s products are available in more than 215,000 retail outlets in North America, and on sites such as www.zigzag.com. For the latest news and information about TPB and its brands, please visit www.turningpointbrands.com. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intend," "plan" and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. As a result, these statements are not guarantees of future performance and actual events may differ materially from those expressed in or suggested by the forward-looking statements. Any forward-looking statement made by TPB in this press release, its reports filed with the Securities and Exchange Commission (the “SEC”) and other public statements made from time-to-time speak only as of the date made. New risks and uncertainties come up from time to time, and it is impossible for TPB to predict or identify all such events or how they may affect it. TPB has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws. Factors that could cause these differences include, but are not limited to those included it the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other reports filed by the Company with the SEC. These statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. Financial Statements Follow: Turning Point Brands, Inc. Consolidated Statements of Income (dollars in thousands except share data) (unaudited) Three Months Ended March 31, 2024 2023 Net sales $ 97,058 $ 100,956 Cost of sales 45,146 52,339 Gross profit 51,912 48,617 Selling, general, and administrative expenses 32,646 30,775 Operating income 19,266 17,842 Interest expense, net 3,479 4,010 Investment (gain) loss (119 ) 4,799 Gain on extinguishment of debt - (777 ) Income before income taxes 15,906 9,810 Income tax expense 3,727 2,468 Consolidated net income 12,179 7,342 Net income (loss) attributable to non-controlling interest 169 (255 ) Net income attributable to Turning Point Brands, Inc. $ 12,010 $ 7,597 Basic income per common share: Net income attributable to Turning Point Brands, Inc. $ 0.68 $ 0.43 Diluted income per common share: Net income attributable to Turning Point Brands, Inc. $ 0.63 $ 0.41 Weighted average common shares outstanding: Basic 17,654,684 17,531,414 Diluted 20,170,314 20,669,152 Supplemental disclosures of statements of income information: Excise tax expense $ 5,190 $ 5,024 FDA fees $ 149 $ 195 Turning Point Brands, Inc. Consolidated Balance Sheets (dollars in thousands except share data) (unaudited) March 31, December 31, ASSETS 2024 2023 Current assets: Cash $ 130,903 $ 117,886 Accounts receivable, net of allowances of $43 in 2024 and $78 in 2023 8,198 9,989 Inventories, net 105,467 98,960 Other current assets 34,437 40,781 Total current assets 279,005 267,616 Property, plant, and equipment, net 24,790 25,300 Deferred income taxes 1,426 1,468 Right of use assets 10,868 11,480 Deferred financing costs, net 2,305 2,450 Goodwill 136,365 136,250 Other intangible assets, net 80,177 80,942 Master Settlement Agreement (MSA) escrow deposits 28,427 28,684 Other assets 22,953 15,166 Total assets $ 586,316 $ 569,356 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 18,934 $ 8,407 Accrued liabilities 30,974 33,635 Current portion of long-term debt 59,397 58,294 Total current liabilities 109,305 100,336 Notes payable and long-term debt 306,496 307,064 Lease liabilities 9,360 9,950 Total liabilities 425,161 417,350 Commitments and contingencies Stockholders' equity: Preferred stock; $0.01 par value; authorized shares 40,000,000; issued and outstanding shares -0- - - Common stock, voting, $0.01 par value; authorized shares, 190,000,000; 20,016,822 issued shares and 17,627,817 outstanding shares at March 31, 2024, and 19,922,137 issued shares and 17,605,677 outstanding shares at December 31, 2023 200 199 Common stock, nonvoting, $0.01 par value; authorized shares, 10,000,000; issued and outstanding shares -0- - - Additional paid-in capital 119,792 119,075 Cost of repurchased common stock (2,389,005 shares at March 31, 2024, and 2,316,460 shares at December 31, 2023) (80,172 ) (78,093 ) Accumulated other comprehensive loss (3,048 ) (2,648 ) Accumulated earnings 123,192 112,443 Non-controlling interest 1,191 1,030 Total stockholders' equity 161,155 152,006 Total liabilities and stockholders' equity $ 586,316 $ 569,356 Turning Point Brands, Inc. Consolidated Statements of Cash Flows (dollars in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Consolidated net income $ 12,179 $ 7,342 Adjustments to reconcile net income to net cash provided by operating activities: Gain on extinguishment of debt - (777 ) Loss (gain) on sale of property, plant, and equipment 1 (6 ) Gain on MSA investments 6 - Depreciation and other amortization expense 944 776 Amortization of other intangible assets 779 771 Amortization of deferred financing costs 696 626 Deferred income tax expense 114 299 Stock compensation expense 2,062 743 Noncash lease income (42 ) (14 ) Loss on investments - 4,897 Changes in operating assets and liabilities: Accounts receivable 1,929 (216 ) Inventories (6,296 ) 6,173 Other current assets 3,130 2,639 Other assets (270 ) (2,895 ) Accounts payable 10,525 2,051 Accrued liabilities and other (3,118 ) (7,025 ) Net cash provided by operating activities $ 22,639 $ 15,384 Cash flows from investing activities: Capital expenditures $ (366 ) $ (2,435 ) Purchases of investments (7,119 ) - Purchases of non-marketable equity investments (500 ) - Restricted cash, MSA escrow deposits (1 ) - Proceeds on the sale of property, plant and equipment - 3 Net cash used in investing activities $ (7,986 ) $ (2,432 ) Cash flows from financing activities: Convertible Senior Notes repurchased $ - $ (13,002 ) Proceeds from call options - 33 Payment of dividends (1,149 ) (1,052 ) Exercise of options 3 357 Redemption of restricted stock units (136 ) - Redemption of performance based restricted stock units (1,212 ) (889 ) Common stock repurchased (2,079 ) - Net cash used in financing activities $ (4,573 ) $ (14,553 ) Net decrease in cash $ 10,080 $ (1,601 ) Effect of foreign currency translation on cash $ (58 ) $ (1 ) Cash, beginning of period: Unrestricted $ 117,886 $ 106,403 Restricted 4,929 4,929 Total cash at beginning of period $ 122,815 $ 111,332 Cash, end of period: Unrestricted $ 130,903 $ 104,801 Restricted 1,934 4,929 Total cash at end of period $ 132,837 $ 109,730 Non-GAAP Financial Measures To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use non-U.S. GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss). We believe Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss) are used by management to compare our performance to that of prior periods for trend analyses and planning purposes and are presented to our board of directors. We believe that EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss) are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to business performance. We define “EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for income taxes, depreciation and amortization. We define “Adjusted EBITDA” as net income before interest expense, loss on extinguishment of debt, provision for income taxes, depreciation, amortization, other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Adjusted Net Income” as net income excluding items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Adjusted Diluted EPS” as diluted earnings per share excluding items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Adjusted Operating Income (Loss)” as operating income excluding other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance. Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. EBITDA, Adjusted Net Income, Adjusted EBITDA Adjusted Diluted EPS, and Adjusted Operating Income (Loss) exclude significant expenses that are required by U.S. GAAP to be recorded in our financial statements and is subject to inherent limitations. In addition, other companies in our industry may calculate this non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. In accordance with SEC rules, we have provided, in the supplemental information attached, a reconciliation of the non-GAAP measures to the next directly comparable GAAP measures. Schedule A Turning Point Brands, Inc. Reconciliation of GAAP Net Income to Adjusted EBITDA (dollars in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Net income attributable to Turning Point Brands, Inc. $ 12,010 $ 7,597 Add: Interest expense, net 3,479 4,010 Gain on extinguishment of debt - (777 ) Income tax expense 3,727 2,468 Depreciation expense 837 776 Amortization expense 886 771 EBITDA $ 20,939 $ 14,845 Components of Adjusted EBITDA Corporate and CDS restructuring (a) 1,261 - ERP/CRM (b) 138 138 Stock options, restricted stock, and incentives expense (c) 2,062 743 Transactional expenses (d) 30 4 FDA PMTA (e) 841 158 Non-cash asset impairment (f) - 4,897 Adjusted EBITDA $ 25,271 $ 20,785 (a) Represents costs associated with corporate and CDS restructuring, including severance. (b) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses. (c) Represents non-cash stock options, restricted stock, incentives expense and Solace performance stock units. (d) Represents the fees incurred for transaction expenses. (e) Represents costs associated with applications related to FDA premarket tobacco product application ("PMTA"). (f) Represents impairment of investment assets. Schedule B Turning Point Brands Reconciliation of GAAP Net Income to Adjusted Net Income and Diluted EPS to Adjusted Diluted EPS (dollars in thousands except share data) (unaudited) Three Months Ended Three Months Ended March 31, 2024 March 31, 2023 Net Income Diluted EPS Net Income Diluted EPS GAAP EPS $ 12,010 $ 0.63 $ 7,597 $ 0.41 Gain on extinguishment of debt (a) - - (582 ) (0.03 ) Corporate restructuring (b) 966 0.05 - - ERP/CRM (c) 106 �� 0.01 103 0.00 Stock options, restricted stock, and incentives expense (d) 1,579 0.08 556 0.03 Transactional expenses (e) 23 0.00 3 0.00 FDA PMTA (f) 644 0.03 118 0.01 Non-cash asset impairment (g) - - 3,665 0.18 Tax benefit (h) 93 0.00 415 0.02 Adjusted $ 15,421 $ 0.80 $ 11,876 $ 0.62 Totals may not foot due to rounding (a) Represents gain on extinguishment of debt tax effected at the quarterly tax rate. (b) Represents costs associated with corporate and CDS restructuring, including severance tax effected at the quarterly tax rate. (c) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses tax effected at the quarterly tax rate. (d) Represents non-cash stock options, restricted stock, incentives expense and Solace PRSUs tax effected at the quarterly tax rate. (e) Represents the fees incurred for transaction expenses tax effected at the quarterly tax rate. (f) Represents costs associated with applications related to the FDA PMTA tax effected at the quarterly tax rate. (g) Represents impairment of investment assets tax effected at the quarterly tax rate. (h) Represents adjustment from quarterly tax rate to annual projected tax rate of 23% in 2024 and 2023. Schedule C Turning Point Brands, Inc. Reconciliation of GAAP Operating Income (Loss) to Adjusted Operating Income (Loss) (dollars in thousands) (unaudited) Consolidated Zig-Zag Products Stoker's Products Creative Distribution Solutions 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 2024 2023 2024 2023 2024 2023 2024 2023 Net sales $ 97,058 $ 100,956 $ 46,697 $ 41,887 $ 36,367 $ 33,662 $ 13,994 $ 25,407 Gross profit $ 51,912 $ 48,617 $ 27,538 $ 22,390 $ 20,815 $ 19,465 $ 3,559 $ 6,762 Operating income (loss) $ 19,266 $ 17,842 $ 18,000 $ 13,641 $ 15,396 $ 14,563 $ (3 ) $ 261 Adjustments: Corporate restructuring 1,261 - - - - - - - ERP/CRM 138 138 - - - - - - Transactional expenses 30 4 - - - - - - FDA PMTA 841 158 - - - - - - Adjusted operating income (loss) $ 21,536 $ 18,142 $ 18,000 $ 13,641 $ 15,396 $ 14,563 $ (3 ) $ 261 View source version on businesswire.com: https://www.businesswire.com/news/home/20240502061776/en/Contacts Investor Contacts Turning Point Brands, Inc. ir@tpbi.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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Turning Point Brands Announces First Quarter 2024 Results By: Turning Point Brands, Inc. via Business Wire May 02, 2024 at 07:30 AM EDT -Q1 2024 Adjusted EBITDA of $25.3 million, up 22% over prior year - Net Sales for Q1 2024 Zig-Zag and Stoker’s Products Increased 10% Year-Over-Year -Company reaffirms full-year 2024 adjusted EBITDA guidance of $95 to $100 million. Turning Point Brands, Inc. (“TPB” or “the Company”) (NYSE: TPB), a manufacturer, marketer and distributor of branded consumer products, including alternative smoking accessories and consumables with active ingredients, announced today financial results for the first quarter ended March 31, 2024. Q1 2024 vs. Q1 2023 Total consolidated net sales decreased 3.9% to $97.1 million Zig-Zag Products net sales increased by 11.5% Stoker’s Products net sales increased by 8.0% Creative Distribution Solutions net sales decreased by 44.9% Gross profit increased 6.8% to $51.9 million Net income increased 58.1% to $12.0 million Adjusted net income increased 29.8% to $15.4 million (see Schedule B for a reconciliation to net income) Adjusted EBITDA increased 21.6% to $25.3 million (see Schedule A for a reconciliation to net income) Diluted EPS of $0.63 and Adjusted Diluted EPS of $0.80 compared to $0.41 and $0.62 in the same period one year ago, respectively (see Schedule B for a reconciliation to Diluted EPS) Graham Purdy, President and CEO, commented: “We are encouraged by our first quarter results. We believe the execution of our strategy has Zig-Zag back on a sustainable growth trajectory; Stoker’s continued to grow and improved its market share; and the national launch of our FRE Modern Oral product is off to a good start.” Zig-Zag Products Segment (48% of total net sales in the quarter) For the first quarter, Zig-Zag Products net sales increased 11.5% to $46.7 million. The Alternative business saw strong growth in the quarter complemented by modest growth in US Papers and Wraps partially offset by Clipper sales declines against prior year trade load. For the quarter, the Zig-Zag Products segment gross profit increased 23.0% to $27.5 million. Gross margin increased 550 basis points to 59.0% driven primarily by product mix. “We were encouraged by the outsized performance of the alternative channel in the quarter,” said Purdy. “Our ongoing efforts continue to demonstrate progress toward sustainably growing the Zig-Zag brand.” Stoker’s Products Segment (38% of total net sales in the quarter) For the first quarter, Stoker’s Products net sales increased 8.0% to $36.4 million on mid-single-digit growth of MST and triple-digit growth off a low base for our Modern Oral product FRE partially offset by mid-single-digit decline in loose-leaf chewing tobacco. For the first quarter, total Stoker’s Products segment volume increased 0.1%, while price / mix increased 7.9%. For the quarter, the Stoker’s Products segment gross profit increased 6.9% to $20.8 million. Gross margin contracted 60 basis points to 57.2% Performance Measures in the First Quarter First quarter consolidated selling, general and administrative (“SG&A”) expenses were $32.6 million compared to $30.8 million in the first quarter of 2023. The first quarter SG&A included the following notable items: $1.3 million of accrued legal and severance costs; $2.1 million of stock compensation expense compared to $0.7 million in the year-ago period; and $0.8 million of FDA PMTA-related expenses for modern oral products compared to $0.2 million in the year-ago period. Total gross debt as of March 31, 2024 was $368.5 million. Net debt (total gross debt less unrestricted cash) at March 31, 2023 was $237.6 million. The Company ended the quarter with total liquidity of $189.9 million, comprised of $130.9 million in cash and $59.0 million of asset backed revolving credit facility capacity. During the quarter, the Company re-purchased 72,545 shares at a cost of $2.1 million. 2024 Outlook The Company is maintaining its previous expectation of full-year 2024 adjusted EBITDA of $95 to $100 million. Creative Distribution Solutions (“CDS”) (14% of total net sales in the quarter) For the first quarter, CDS net sales were $14.0 million, gross profit was $3.6 million, and gross margin was 25.4%. Earnings Conference Call As previously disclosed, a conference call with the investment community to review TPB’s financial results has been scheduled for 10:00 a.m. Eastern on Thursday, May 2, 2024. Investment community participants should dial in 10 minutes ahead of time using the toll-free number (888) 330-2502 (international participants should call (240) 789-2713 and follow the audio prompts after typing in the event ID: 6640134. A live listen-only webcast of the call will be available on the Events and Presentations section of the investor relations portion of the Company website (www.turningpointbrands.com). A replay of the webcast will be available on the site two hours following the call. Non-GAAP Financial Measures In addition to financial measures prepared in accordance with generally accepted accounting principles in the United States (GAAP), this press release includes certain non-GAAP financial measures including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS and Adjusted Operating Income (Loss). A reconciliation of these non-GAAP financial measures accompanies this release. About Turning Point Brands, Inc. Turning Point Brands (NYSE: TPB) is a manufacturer, marketer and distributor of branded consumer products including alternative smoking accessories and consumables with active ingredients through its iconic Zig-Zag® and Stoker’s® brands. TPB’s products are available in more than 215,000 retail outlets in North America, and on sites such as www.zigzag.com. For the latest news and information about TPB and its brands, please visit www.turningpointbrands.com. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intend," "plan" and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. As a result, these statements are not guarantees of future performance and actual events may differ materially from those expressed in or suggested by the forward-looking statements. Any forward-looking statement made by TPB in this press release, its reports filed with the Securities and Exchange Commission (the “SEC”) and other public statements made from time-to-time speak only as of the date made. New risks and uncertainties come up from time to time, and it is impossible for TPB to predict or identify all such events or how they may affect it. TPB has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws. Factors that could cause these differences include, but are not limited to those included it the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other reports filed by the Company with the SEC. These statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. Financial Statements Follow: Turning Point Brands, Inc. Consolidated Statements of Income (dollars in thousands except share data) (unaudited) Three Months Ended March 31, 2024 2023 Net sales $ 97,058 $ 100,956 Cost of sales 45,146 52,339 Gross profit 51,912 48,617 Selling, general, and administrative expenses 32,646 30,775 Operating income 19,266 17,842 Interest expense, net 3,479 4,010 Investment (gain) loss (119 ) 4,799 Gain on extinguishment of debt - (777 ) Income before income taxes 15,906 9,810 Income tax expense 3,727 2,468 Consolidated net income 12,179 7,342 Net income (loss) attributable to non-controlling interest 169 (255 ) Net income attributable to Turning Point Brands, Inc. $ 12,010 $ 7,597 Basic income per common share: Net income attributable to Turning Point Brands, Inc. $ 0.68 $ 0.43 Diluted income per common share: Net income attributable to Turning Point Brands, Inc. $ 0.63 $ 0.41 Weighted average common shares outstanding: Basic 17,654,684 17,531,414 Diluted 20,170,314 20,669,152 Supplemental disclosures of statements of income information: Excise tax expense $ 5,190 $ 5,024 FDA fees $ 149 $ 195 Turning Point Brands, Inc. Consolidated Balance Sheets (dollars in thousands except share data) (unaudited) March 31, December 31, ASSETS 2024 2023 Current assets: Cash $ 130,903 $ 117,886 Accounts receivable, net of allowances of $43 in 2024 and $78 in 2023 8,198 9,989 Inventories, net 105,467 98,960 Other current assets 34,437 40,781 Total current assets 279,005 267,616 Property, plant, and equipment, net 24,790 25,300 Deferred income taxes 1,426 1,468 Right of use assets 10,868 11,480 Deferred financing costs, net 2,305 2,450 Goodwill 136,365 136,250 Other intangible assets, net 80,177 80,942 Master Settlement Agreement (MSA) escrow deposits 28,427 28,684 Other assets 22,953 15,166 Total assets $ 586,316 $ 569,356 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 18,934 $ 8,407 Accrued liabilities 30,974 33,635 Current portion of long-term debt 59,397 58,294 Total current liabilities 109,305 100,336 Notes payable and long-term debt 306,496 307,064 Lease liabilities 9,360 9,950 Total liabilities 425,161 417,350 Commitments and contingencies Stockholders' equity: Preferred stock; $0.01 par value; authorized shares 40,000,000; issued and outstanding shares -0- - - Common stock, voting, $0.01 par value; authorized shares, 190,000,000; 20,016,822 issued shares and 17,627,817 outstanding shares at March 31, 2024, and 19,922,137 issued shares and 17,605,677 outstanding shares at December 31, 2023 200 199 Common stock, nonvoting, $0.01 par value; authorized shares, 10,000,000; issued and outstanding shares -0- - - Additional paid-in capital 119,792 119,075 Cost of repurchased common stock (2,389,005 shares at March 31, 2024, and 2,316,460 shares at December 31, 2023) (80,172 ) (78,093 ) Accumulated other comprehensive loss (3,048 ) (2,648 ) Accumulated earnings 123,192 112,443 Non-controlling interest 1,191 1,030 Total stockholders' equity 161,155 152,006 Total liabilities and stockholders' equity $ 586,316 $ 569,356 Turning Point Brands, Inc. Consolidated Statements of Cash Flows (dollars in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Consolidated net income $ 12,179 $ 7,342 Adjustments to reconcile net income to net cash provided by operating activities: Gain on extinguishment of debt - (777 ) Loss (gain) on sale of property, plant, and equipment 1 (6 ) Gain on MSA investments 6 - Depreciation and other amortization expense 944 776 Amortization of other intangible assets 779 771 Amortization of deferred financing costs 696 626 Deferred income tax expense 114 299 Stock compensation expense 2,062 743 Noncash lease income (42 ) (14 ) Loss on investments - 4,897 Changes in operating assets and liabilities: Accounts receivable 1,929 (216 ) Inventories (6,296 ) 6,173 Other current assets 3,130 2,639 Other assets (270 ) (2,895 ) Accounts payable 10,525 2,051 Accrued liabilities and other (3,118 ) (7,025 ) Net cash provided by operating activities $ 22,639 $ 15,384 Cash flows from investing activities: Capital expenditures $ (366 ) $ (2,435 ) Purchases of investments (7,119 ) - Purchases of non-marketable equity investments (500 ) - Restricted cash, MSA escrow deposits (1 ) - Proceeds on the sale of property, plant and equipment - 3 Net cash used in investing activities $ (7,986 ) $ (2,432 ) Cash flows from financing activities: Convertible Senior Notes repurchased $ - $ (13,002 ) Proceeds from call options - 33 Payment of dividends (1,149 ) (1,052 ) Exercise of options 3 357 Redemption of restricted stock units (136 ) - Redemption of performance based restricted stock units (1,212 ) (889 ) Common stock repurchased (2,079 ) - Net cash used in financing activities $ (4,573 ) $ (14,553 ) Net decrease in cash $ 10,080 $ (1,601 ) Effect of foreign currency translation on cash $ (58 ) $ (1 ) Cash, beginning of period: Unrestricted $ 117,886 $ 106,403 Restricted 4,929 4,929 Total cash at beginning of period $ 122,815 $ 111,332 Cash, end of period: Unrestricted $ 130,903 $ 104,801 Restricted 1,934 4,929 Total cash at end of period $ 132,837 $ 109,730 Non-GAAP Financial Measures To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use non-U.S. GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss). We believe Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss) are used by management to compare our performance to that of prior periods for trend analyses and planning purposes and are presented to our board of directors. We believe that EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss) are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to business performance. We define “EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for income taxes, depreciation and amortization. We define “Adjusted EBITDA” as net income before interest expense, loss on extinguishment of debt, provision for income taxes, depreciation, amortization, other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Adjusted Net Income” as net income excluding items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Adjusted Diluted EPS” as diluted earnings per share excluding items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Adjusted Operating Income (Loss)” as operating income excluding other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance. Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. EBITDA, Adjusted Net Income, Adjusted EBITDA Adjusted Diluted EPS, and Adjusted Operating Income (Loss) exclude significant expenses that are required by U.S. GAAP to be recorded in our financial statements and is subject to inherent limitations. In addition, other companies in our industry may calculate this non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. In accordance with SEC rules, we have provided, in the supplemental information attached, a reconciliation of the non-GAAP measures to the next directly comparable GAAP measures. Schedule A Turning Point Brands, Inc. Reconciliation of GAAP Net Income to Adjusted EBITDA (dollars in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Net income attributable to Turning Point Brands, Inc. $ 12,010 $ 7,597 Add: Interest expense, net 3,479 4,010 Gain on extinguishment of debt - (777 ) Income tax expense 3,727 2,468 Depreciation expense 837 776 Amortization expense 886 771 EBITDA $ 20,939 $ 14,845 Components of Adjusted EBITDA Corporate and CDS restructuring (a) 1,261 - ERP/CRM (b) 138 138 Stock options, restricted stock, and incentives expense (c) 2,062 743 Transactional expenses (d) 30 4 FDA PMTA (e) 841 158 Non-cash asset impairment (f) - 4,897 Adjusted EBITDA $ 25,271 $ 20,785 (a) Represents costs associated with corporate and CDS restructuring, including severance. (b) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses. (c) Represents non-cash stock options, restricted stock, incentives expense and Solace performance stock units. (d) Represents the fees incurred for transaction expenses. (e) Represents costs associated with applications related to FDA premarket tobacco product application ("PMTA"). (f) Represents impairment of investment assets. Schedule B Turning Point Brands Reconciliation of GAAP Net Income to Adjusted Net Income and Diluted EPS to Adjusted Diluted EPS (dollars in thousands except share data) (unaudited) Three Months Ended Three Months Ended March 31, 2024 March 31, 2023 Net Income Diluted EPS Net Income Diluted EPS GAAP EPS $ 12,010 $ 0.63 $ 7,597 $ 0.41 Gain on extinguishment of debt (a) - - (582 ) (0.03 ) Corporate restructuring (b) 966 0.05 - - ERP/CRM (c) 106 �� 0.01 103 0.00 Stock options, restricted stock, and incentives expense (d) 1,579 0.08 556 0.03 Transactional expenses (e) 23 0.00 3 0.00 FDA PMTA (f) 644 0.03 118 0.01 Non-cash asset impairment (g) - - 3,665 0.18 Tax benefit (h) 93 0.00 415 0.02 Adjusted $ 15,421 $ 0.80 $ 11,876 $ 0.62 Totals may not foot due to rounding (a) Represents gain on extinguishment of debt tax effected at the quarterly tax rate. (b) Represents costs associated with corporate and CDS restructuring, including severance tax effected at the quarterly tax rate. (c) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses tax effected at the quarterly tax rate. (d) Represents non-cash stock options, restricted stock, incentives expense and Solace PRSUs tax effected at the quarterly tax rate. (e) Represents the fees incurred for transaction expenses tax effected at the quarterly tax rate. (f) Represents costs associated with applications related to the FDA PMTA tax effected at the quarterly tax rate. (g) Represents impairment of investment assets tax effected at the quarterly tax rate. (h) Represents adjustment from quarterly tax rate to annual projected tax rate of 23% in 2024 and 2023. Schedule C Turning Point Brands, Inc. Reconciliation of GAAP Operating Income (Loss) to Adjusted Operating Income (Loss) (dollars in thousands) (unaudited) Consolidated Zig-Zag Products Stoker's Products Creative Distribution Solutions 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 2024 2023 2024 2023 2024 2023 2024 2023 Net sales $ 97,058 $ 100,956 $ 46,697 $ 41,887 $ 36,367 $ 33,662 $ 13,994 $ 25,407 Gross profit $ 51,912 $ 48,617 $ 27,538 $ 22,390 $ 20,815 $ 19,465 $ 3,559 $ 6,762 Operating income (loss) $ 19,266 $ 17,842 $ 18,000 $ 13,641 $ 15,396 $ 14,563 $ (3 ) $ 261 Adjustments: Corporate restructuring 1,261 - - - - - - - ERP/CRM 138 138 - - - - - - Transactional expenses 30 4 - - - - - - FDA PMTA 841 158 - - - - - - Adjusted operating income (loss) $ 21,536 $ 18,142 $ 18,000 $ 13,641 $ 15,396 $ 14,563 $ (3 ) $ 261 View source version on businesswire.com: https://www.businesswire.com/news/home/20240502061776/en/Contacts Investor Contacts Turning Point Brands, Inc. ir@tpbi.com
-Q1 2024 Adjusted EBITDA of $25.3 million, up 22% over prior year - Net Sales for Q1 2024 Zig-Zag and Stoker’s Products Increased 10% Year-Over-Year -Company reaffirms full-year 2024 adjusted EBITDA guidance of $95 to $100 million.
Turning Point Brands, Inc. (“TPB” or “the Company”) (NYSE: TPB), a manufacturer, marketer and distributor of branded consumer products, including alternative smoking accessories and consumables with active ingredients, announced today financial results for the first quarter ended March 31, 2024. Q1 2024 vs. Q1 2023 Total consolidated net sales decreased 3.9% to $97.1 million Zig-Zag Products net sales increased by 11.5% Stoker’s Products net sales increased by 8.0% Creative Distribution Solutions net sales decreased by 44.9% Gross profit increased 6.8% to $51.9 million Net income increased 58.1% to $12.0 million Adjusted net income increased 29.8% to $15.4 million (see Schedule B for a reconciliation to net income) Adjusted EBITDA increased 21.6% to $25.3 million (see Schedule A for a reconciliation to net income) Diluted EPS of $0.63 and Adjusted Diluted EPS of $0.80 compared to $0.41 and $0.62 in the same period one year ago, respectively (see Schedule B for a reconciliation to Diluted EPS) Graham Purdy, President and CEO, commented: “We are encouraged by our first quarter results. We believe the execution of our strategy has Zig-Zag back on a sustainable growth trajectory; Stoker’s continued to grow and improved its market share; and the national launch of our FRE Modern Oral product is off to a good start.” Zig-Zag Products Segment (48% of total net sales in the quarter) For the first quarter, Zig-Zag Products net sales increased 11.5% to $46.7 million. The Alternative business saw strong growth in the quarter complemented by modest growth in US Papers and Wraps partially offset by Clipper sales declines against prior year trade load. For the quarter, the Zig-Zag Products segment gross profit increased 23.0% to $27.5 million. Gross margin increased 550 basis points to 59.0% driven primarily by product mix. “We were encouraged by the outsized performance of the alternative channel in the quarter,” said Purdy. “Our ongoing efforts continue to demonstrate progress toward sustainably growing the Zig-Zag brand.” Stoker’s Products Segment (38% of total net sales in the quarter) For the first quarter, Stoker’s Products net sales increased 8.0% to $36.4 million on mid-single-digit growth of MST and triple-digit growth off a low base for our Modern Oral product FRE partially offset by mid-single-digit decline in loose-leaf chewing tobacco. For the first quarter, total Stoker’s Products segment volume increased 0.1%, while price / mix increased 7.9%. For the quarter, the Stoker’s Products segment gross profit increased 6.9% to $20.8 million. Gross margin contracted 60 basis points to 57.2% Performance Measures in the First Quarter First quarter consolidated selling, general and administrative (“SG&A”) expenses were $32.6 million compared to $30.8 million in the first quarter of 2023. The first quarter SG&A included the following notable items: $1.3 million of accrued legal and severance costs; $2.1 million of stock compensation expense compared to $0.7 million in the year-ago period; and $0.8 million of FDA PMTA-related expenses for modern oral products compared to $0.2 million in the year-ago period. Total gross debt as of March 31, 2024 was $368.5 million. Net debt (total gross debt less unrestricted cash) at March 31, 2023 was $237.6 million. The Company ended the quarter with total liquidity of $189.9 million, comprised of $130.9 million in cash and $59.0 million of asset backed revolving credit facility capacity. During the quarter, the Company re-purchased 72,545 shares at a cost of $2.1 million. 2024 Outlook The Company is maintaining its previous expectation of full-year 2024 adjusted EBITDA of $95 to $100 million. Creative Distribution Solutions (“CDS”) (14% of total net sales in the quarter) For the first quarter, CDS net sales were $14.0 million, gross profit was $3.6 million, and gross margin was 25.4%. Earnings Conference Call As previously disclosed, a conference call with the investment community to review TPB’s financial results has been scheduled for 10:00 a.m. Eastern on Thursday, May 2, 2024. Investment community participants should dial in 10 minutes ahead of time using the toll-free number (888) 330-2502 (international participants should call (240) 789-2713 and follow the audio prompts after typing in the event ID: 6640134. A live listen-only webcast of the call will be available on the Events and Presentations section of the investor relations portion of the Company website (www.turningpointbrands.com). A replay of the webcast will be available on the site two hours following the call. Non-GAAP Financial Measures In addition to financial measures prepared in accordance with generally accepted accounting principles in the United States (GAAP), this press release includes certain non-GAAP financial measures including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS and Adjusted Operating Income (Loss). A reconciliation of these non-GAAP financial measures accompanies this release. About Turning Point Brands, Inc. Turning Point Brands (NYSE: TPB) is a manufacturer, marketer and distributor of branded consumer products including alternative smoking accessories and consumables with active ingredients through its iconic Zig-Zag® and Stoker’s® brands. TPB’s products are available in more than 215,000 retail outlets in North America, and on sites such as www.zigzag.com. For the latest news and information about TPB and its brands, please visit www.turningpointbrands.com. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intend," "plan" and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. As a result, these statements are not guarantees of future performance and actual events may differ materially from those expressed in or suggested by the forward-looking statements. Any forward-looking statement made by TPB in this press release, its reports filed with the Securities and Exchange Commission (the “SEC”) and other public statements made from time-to-time speak only as of the date made. New risks and uncertainties come up from time to time, and it is impossible for TPB to predict or identify all such events or how they may affect it. TPB has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws. Factors that could cause these differences include, but are not limited to those included it the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other reports filed by the Company with the SEC. These statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. Financial Statements Follow: Turning Point Brands, Inc. Consolidated Statements of Income (dollars in thousands except share data) (unaudited) Three Months Ended March 31, 2024 2023 Net sales $ 97,058 $ 100,956 Cost of sales 45,146 52,339 Gross profit 51,912 48,617 Selling, general, and administrative expenses 32,646 30,775 Operating income 19,266 17,842 Interest expense, net 3,479 4,010 Investment (gain) loss (119 ) 4,799 Gain on extinguishment of debt - (777 ) Income before income taxes 15,906 9,810 Income tax expense 3,727 2,468 Consolidated net income 12,179 7,342 Net income (loss) attributable to non-controlling interest 169 (255 ) Net income attributable to Turning Point Brands, Inc. $ 12,010 $ 7,597 Basic income per common share: Net income attributable to Turning Point Brands, Inc. $ 0.68 $ 0.43 Diluted income per common share: Net income attributable to Turning Point Brands, Inc. $ 0.63 $ 0.41 Weighted average common shares outstanding: Basic 17,654,684 17,531,414 Diluted 20,170,314 20,669,152 Supplemental disclosures of statements of income information: Excise tax expense $ 5,190 $ 5,024 FDA fees $ 149 $ 195 Turning Point Brands, Inc. Consolidated Balance Sheets (dollars in thousands except share data) (unaudited) March 31, December 31, ASSETS 2024 2023 Current assets: Cash $ 130,903 $ 117,886 Accounts receivable, net of allowances of $43 in 2024 and $78 in 2023 8,198 9,989 Inventories, net 105,467 98,960 Other current assets 34,437 40,781 Total current assets 279,005 267,616 Property, plant, and equipment, net 24,790 25,300 Deferred income taxes 1,426 1,468 Right of use assets 10,868 11,480 Deferred financing costs, net 2,305 2,450 Goodwill 136,365 136,250 Other intangible assets, net 80,177 80,942 Master Settlement Agreement (MSA) escrow deposits 28,427 28,684 Other assets 22,953 15,166 Total assets $ 586,316 $ 569,356 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 18,934 $ 8,407 Accrued liabilities 30,974 33,635 Current portion of long-term debt 59,397 58,294 Total current liabilities 109,305 100,336 Notes payable and long-term debt 306,496 307,064 Lease liabilities 9,360 9,950 Total liabilities 425,161 417,350 Commitments and contingencies Stockholders' equity: Preferred stock; $0.01 par value; authorized shares 40,000,000; issued and outstanding shares -0- - - Common stock, voting, $0.01 par value; authorized shares, 190,000,000; 20,016,822 issued shares and 17,627,817 outstanding shares at March 31, 2024, and 19,922,137 issued shares and 17,605,677 outstanding shares at December 31, 2023 200 199 Common stock, nonvoting, $0.01 par value; authorized shares, 10,000,000; issued and outstanding shares -0- - - Additional paid-in capital 119,792 119,075 Cost of repurchased common stock (2,389,005 shares at March 31, 2024, and 2,316,460 shares at December 31, 2023) (80,172 ) (78,093 ) Accumulated other comprehensive loss (3,048 ) (2,648 ) Accumulated earnings 123,192 112,443 Non-controlling interest 1,191 1,030 Total stockholders' equity 161,155 152,006 Total liabilities and stockholders' equity $ 586,316 $ 569,356 Turning Point Brands, Inc. Consolidated Statements of Cash Flows (dollars in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Consolidated net income $ 12,179 $ 7,342 Adjustments to reconcile net income to net cash provided by operating activities: Gain on extinguishment of debt - (777 ) Loss (gain) on sale of property, plant, and equipment 1 (6 ) Gain on MSA investments 6 - Depreciation and other amortization expense 944 776 Amortization of other intangible assets 779 771 Amortization of deferred financing costs 696 626 Deferred income tax expense 114 299 Stock compensation expense 2,062 743 Noncash lease income (42 ) (14 ) Loss on investments - 4,897 Changes in operating assets and liabilities: Accounts receivable 1,929 (216 ) Inventories (6,296 ) 6,173 Other current assets 3,130 2,639 Other assets (270 ) (2,895 ) Accounts payable 10,525 2,051 Accrued liabilities and other (3,118 ) (7,025 ) Net cash provided by operating activities $ 22,639 $ 15,384 Cash flows from investing activities: Capital expenditures $ (366 ) $ (2,435 ) Purchases of investments (7,119 ) - Purchases of non-marketable equity investments (500 ) - Restricted cash, MSA escrow deposits (1 ) - Proceeds on the sale of property, plant and equipment - 3 Net cash used in investing activities $ (7,986 ) $ (2,432 ) Cash flows from financing activities: Convertible Senior Notes repurchased $ - $ (13,002 ) Proceeds from call options - 33 Payment of dividends (1,149 ) (1,052 ) Exercise of options 3 357 Redemption of restricted stock units (136 ) - Redemption of performance based restricted stock units (1,212 ) (889 ) Common stock repurchased (2,079 ) - Net cash used in financing activities $ (4,573 ) $ (14,553 ) Net decrease in cash $ 10,080 $ (1,601 ) Effect of foreign currency translation on cash $ (58 ) $ (1 ) Cash, beginning of period: Unrestricted $ 117,886 $ 106,403 Restricted 4,929 4,929 Total cash at beginning of period $ 122,815 $ 111,332 Cash, end of period: Unrestricted $ 130,903 $ 104,801 Restricted 1,934 4,929 Total cash at end of period $ 132,837 $ 109,730 Non-GAAP Financial Measures To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use non-U.S. GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss). We believe Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss) are used by management to compare our performance to that of prior periods for trend analyses and planning purposes and are presented to our board of directors. We believe that EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss) are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to business performance. We define “EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for income taxes, depreciation and amortization. We define “Adjusted EBITDA” as net income before interest expense, loss on extinguishment of debt, provision for income taxes, depreciation, amortization, other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Adjusted Net Income” as net income excluding items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Adjusted Diluted EPS” as diluted earnings per share excluding items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Adjusted Operating Income (Loss)” as operating income excluding other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance. Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. EBITDA, Adjusted Net Income, Adjusted EBITDA Adjusted Diluted EPS, and Adjusted Operating Income (Loss) exclude significant expenses that are required by U.S. GAAP to be recorded in our financial statements and is subject to inherent limitations. In addition, other companies in our industry may calculate this non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. In accordance with SEC rules, we have provided, in the supplemental information attached, a reconciliation of the non-GAAP measures to the next directly comparable GAAP measures. Schedule A Turning Point Brands, Inc. Reconciliation of GAAP Net Income to Adjusted EBITDA (dollars in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Net income attributable to Turning Point Brands, Inc. $ 12,010 $ 7,597 Add: Interest expense, net 3,479 4,010 Gain on extinguishment of debt - (777 ) Income tax expense 3,727 2,468 Depreciation expense 837 776 Amortization expense 886 771 EBITDA $ 20,939 $ 14,845 Components of Adjusted EBITDA Corporate and CDS restructuring (a) 1,261 - ERP/CRM (b) 138 138 Stock options, restricted stock, and incentives expense (c) 2,062 743 Transactional expenses (d) 30 4 FDA PMTA (e) 841 158 Non-cash asset impairment (f) - 4,897 Adjusted EBITDA $ 25,271 $ 20,785 (a) Represents costs associated with corporate and CDS restructuring, including severance. (b) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses. (c) Represents non-cash stock options, restricted stock, incentives expense and Solace performance stock units. (d) Represents the fees incurred for transaction expenses. (e) Represents costs associated with applications related to FDA premarket tobacco product application ("PMTA"). (f) Represents impairment of investment assets. Schedule B Turning Point Brands Reconciliation of GAAP Net Income to Adjusted Net Income and Diluted EPS to Adjusted Diluted EPS (dollars in thousands except share data) (unaudited) Three Months Ended Three Months Ended March 31, 2024 March 31, 2023 Net Income Diluted EPS Net Income Diluted EPS GAAP EPS $ 12,010 $ 0.63 $ 7,597 $ 0.41 Gain on extinguishment of debt (a) - - (582 ) (0.03 ) Corporate restructuring (b) 966 0.05 - - ERP/CRM (c) 106 �� 0.01 103 0.00 Stock options, restricted stock, and incentives expense (d) 1,579 0.08 556 0.03 Transactional expenses (e) 23 0.00 3 0.00 FDA PMTA (f) 644 0.03 118 0.01 Non-cash asset impairment (g) - - 3,665 0.18 Tax benefit (h) 93 0.00 415 0.02 Adjusted $ 15,421 $ 0.80 $ 11,876 $ 0.62 Totals may not foot due to rounding (a) Represents gain on extinguishment of debt tax effected at the quarterly tax rate. (b) Represents costs associated with corporate and CDS restructuring, including severance tax effected at the quarterly tax rate. (c) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses tax effected at the quarterly tax rate. (d) Represents non-cash stock options, restricted stock, incentives expense and Solace PRSUs tax effected at the quarterly tax rate. (e) Represents the fees incurred for transaction expenses tax effected at the quarterly tax rate. (f) Represents costs associated with applications related to the FDA PMTA tax effected at the quarterly tax rate. (g) Represents impairment of investment assets tax effected at the quarterly tax rate. (h) Represents adjustment from quarterly tax rate to annual projected tax rate of 23% in 2024 and 2023. Schedule C Turning Point Brands, Inc. Reconciliation of GAAP Operating Income (Loss) to Adjusted Operating Income (Loss) (dollars in thousands) (unaudited) Consolidated Zig-Zag Products Stoker's Products Creative Distribution Solutions 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 1st Quarter 2024 2023 2024 2023 2024 2023 2024 2023 Net sales $ 97,058 $ 100,956 $ 46,697 $ 41,887 $ 36,367 $ 33,662 $ 13,994 $ 25,407 Gross profit $ 51,912 $ 48,617 $ 27,538 $ 22,390 $ 20,815 $ 19,465 $ 3,559 $ 6,762 Operating income (loss) $ 19,266 $ 17,842 $ 18,000 $ 13,641 $ 15,396 $ 14,563 $ (3 ) $ 261 Adjustments: Corporate restructuring 1,261 - - - - - - - ERP/CRM 138 138 - - - - - - Transactional expenses 30 4 - - - - - - FDA PMTA 841 158 - - - - - - Adjusted operating income (loss) $ 21,536 $ 18,142 $ 18,000 $ 13,641 $ 15,396 $ 14,563 $ (3 ) $ 261 View source version on businesswire.com: https://www.businesswire.com/news/home/20240502061776/en/
